By Fred Fleitz
While recent setbacks for Arctic oil and gas exploration will convince some Western companies to give up trying to develop the region’s potentially huge energy reserves, other energy firms are expanding their investments. Russia also is determined to press ahead with Arctic energy exploration.
The bottom line is that America needs better leadership and planning to deal with issues related to Arctic energy, trade and security.
The area north of the Arctic Circle holds an estimated 90 billion barrels of recoverable oil and 1,670 trillion cubic feet of gas, according to the U.S. Geological Survey. Experts estimate that the Arctic accounts for about 22 percent of undiscovered technically recoverable energy resources on earth.
Norwegian firm Statoil last week announced it is delaying an Arctic oil production effort in the Barents Sea after drilling found significantly less oil than was expected in the Johan Castberg field, located off the coast of Norway.
In February, Statoil abandoned exploration of a nearby natural gas field after only a modest amount of gas was found.
Statoil, BP, and ExxonMobil pulled out of oil exploration off the Greenland coast over the last six months due to a failure to find any oil, a disappointing scientific report, and a need to develop new technology to tackle challenging conditions, including extreme sub-zero temperatures, icebergs and year-round ice.
Numerous problems have also delayed Arctic energy exploration in Alaskan waters. Royal Dutch Shell called off exploration scheduled for this summer in the Chukchi and Beauford Seas, located off Alaska’s northwest and northeast coasts, because of a court decision faulting a U.S. government assessment of the environmental risks to the region from oil drilling. Shell also called off energy exploration in 2013 after its 2012 efforts were plagued by a series of mishaps and mechanical failures.
Imperial Oil Canada, Exxon Mobil and BP plan to drill at least one well in the Beauford Sea off the coast of Canada’s Northwest Territories. The exploration will not begin between 2016 and 2020 due to the need to develop vessels and equipment that can operate in the region’s severe environment.
Other Western oil companies are pressing forward with Alaskan energy production and exploration. BP, which operates Alaska’s Prudhoe Bay oil field, is investing in technology to coax more oil out of the aging field, North America’s largest. ConocoPhillips, which operates the Alpine and Kuparuk fields along Alaska’s North Slope, is engaged in similar projects and plans to drill more wells in these fields.
ExxonMobil, BP, ConocoPhillips, TransCanada and the State of Alaska are working together to construct a liquefied natural (LNG) gas plant to ship Alaska’s huge natural gas surplus to Asian countries. The LNG project could cost $45 billion to $60 billon, far more than the $8 billion trans-Alaska pipeline.
This LNG project could be endangered if Alaskans vote next month to repeal Senate Bill 21 which eliminated progressive taxation on oil revenues. Oil companies argue that Alaska will be much less attractive for energy exploration if this legislation is repealed.
ANWR Again an Issue in Alaskan Elections
The debate continues over energy exploration in the Arctic National Wildlife Refuge (ANWR) which the U.S. Energy Information Agency believes holds between 5.7 billion and 16 billion barrels of recoverable oil. (By comparison, Prudhoe Bay’s total recoverable oil reserves are estimated to be 24 billion barrels, 12 billion of which are believed to be remaining.) Washington politicians and the Obama administration refuse to budge in blocking energy exploration in ANWR.
GOP Senate candidate and former Alaska Governor Dan Sullivan supports a lawsuit by the Alaska government against the Obama administration for rejecting its plan to explore for oil and natural gas in ANWR.
Incumbent Senator Mark Begich says he supports the Alaskan government’s ANWR exploration plan blocked by the Obama administration. However, Sullivan has accused Begich of not doing enough to get the plan approved in Washington.
Reflecting his opposition to Washington’s ban on energy exploration in ANWR, another Alaskan named Dan Sullivan, the mayor of Anchorage who is running to replace Treadwell as Lieutenant Governor, made news in May when he said “If I was governor today, I’d probably invade ANWR.”
In a related development, the U.S. House of Representatives on June 26 passed the Lowering Gasoline Prices to Fuel an America that Works Act, a bill that would open to energy exploration the 24-million acre National Petroleum Reserve-Alaska, a region situated east of Prudhoe Bay on the Arctic Ocean. The bill would scrap the Department of the Interior’s existing management of this region and allow additional energy leases and off-shore exploration. It is unlikely to become law because of opposition from Senate Democrats and the Obama administration.
Russia Bets Big on Arctic Energy
While some Western oil companies have backed away from offshore energy exploration projects in the Arctic, Russia is aggressively pushing forward with them.
In April, Russian President Vladimir Putin announced the first oil shipment from Russia’s Prirazlomnoye field, located in the Barents Sea, making it the first operational offshore oil field in the Arctic. Prirazlomnoye is estimated to have reserves of about 600 million barrels of oil.
The Prirazlomnoye platform was the site of an anti-drilling protest last September, which ended when Russian paratroopers boarded the Greenpeace vessel Arctic Sunrise and arrested 30 crew and activists. The demonstrators were jailed for two months before they were freed by a parliamentary amnesty. Russia refuses to release the ship which remains in the port of Murmansk.
Russian energy firm Gazprom Neft will be engaged in oil exploration in a nearby Arctic Sea area known as the Dolginskoye field during the ice-free summer months of 2014.
ExxonMobil and Russian oil company Rosneft plan to spend up to $500 billion on Arctic oil exploration off the Russian Arctic coast. The two companies plan a joint project to explore for oil and gas in Russia’s Kara Sea this fall.
Russia is taking advantage of retreating Arctic ice due to climate change to step up offshore energy exploration. Alaskan Lt. Gov. Mead Treadwell, a GOP Senate candidate, has raised related concerns over Russian President Putin’s plans to exploit retreating sea ice to develop a northern sea route through the Arctic that could ship over four tons of cargo per year.
Russia reportedly is planning to build naval stations for warships and other vessels in the Arctic situated along a northern sea route. Russia intends to station military forces in the region by 2020 to ensure economic as well as political interests.
Despite some setbacks, there are enormous energy and trade opportunities for the United States in the Arctic as well as security challenges. While some Western energy firms are proceeding slowing on Arctic opportunities, Russia is racing ahead. A May 2014 General Accountability Office report found that Washington’s Arctic policies are unfocused and bogged down in bureaucracy. Leadership is needed by elected officials in Washington and in Alaska to develop better U.S. policies to responsibly tap the Arctic’s huge energy reserves and to protect America’s security interests in the region.
Fred Fleitz, a former CIA analyst, is a Senior Fellow with the Center for Security Policy and Chief Analyst with LIGNET.com.
